Japanese Corporations Implement 5.39% Wage Increases
Japan Witnesses Record-Breaking Wage Hikes in 2025
Japan has experienced a significant wage increase in the 2025 spring labor-management wage negotiations, with an average wage rise of 5.39% - the highest since the introduction of the shunto system in 1976.
The wage hike, which surpassed the record set in 2024, is a result of inflation-driven wage pressure, a tight labor market, and supportive but cautious monetary policy.
Employers, facing pressure to increase wages amid a tight labor supply, have been compelled to offer higher salaries to attract and retain talent. Inflation, which remains notably above the Bank of Japan’s 2% target (Tokyo CPI core at ~2.9% YoY in July 2025), has also encouraged wages to rise to compensate for higher living costs.
The Bank of Japan’s cautious but steady interest rate increases (from zero to 0.5% in 2025) and reduction of bond purchases provide a backdrop supporting wage gains without abrupt tightening that could jeopardize jobs or demand.
Particularly in export sectors like autos, wage negotiations are linked to firm financial performance, although tariffs and trade uncertainties pose risks.
The discussions in wage negotiations were focused on securing human resources amid high prices. The tally of wage negotiations covered 139 companies in 19 sectors, as overseen by the Japan Business Federation, or Keidanren.
The average monthly pay increase for major Japanese firms is expected to be 5,390,000 yen (approximately 19,195 yen per day). The announcement was made on August 6, 2025, in Tokyo (Jiji Press).
This wage hike momentum is part of a continuing trend, marking one of the largest increases since the shunto began in 1976. In fact, the 2025 increase is the second biggest since comparable data became available in 1976, with last year's pay hike rate being 5.58%.
The wage hikes in 2025 are a response to the high prices in the economy and are aimed at securing human resources. This record-breaking wage increase indicates renewed wage momentum amid inflation and labor market tightness.
In the context of escalating prices and a tight labor market, employers are compelled to offer higher salaries, which could potentially impact their financial performance in business sectors like auto-export. Furthermore, the record-breaking wage hikes, primarily driven by inflation and aimed at securing human resources, have significantly increased the average monthly pay in major Japanese firms, surpassing the previous year's figure and marking one of the largest increases since the shunto system was introduced in 1976.
